7. RAILROAD” 
| PIECE RATES 


BY 


HARRINGTON EMERSON 





THE EMERSON COMPANY / 


NEW YORK r 








THE EMERSON COMPANY 
EFFICIENCY ENGINEERS 


NEW YORK 
30 CHURCH STREET 


PITTSBURGH CHICAGO 
OLIVER BUILDING RAILWAY EXCHANGE 


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RAILROAD PIECE RATES 


Piece rates are a method of paying workers by the piece, by the 
weight, by distance, instead of by the year, month, day or hour. 

_ Disagreements about the piece rate method of payment of rail- 
road employes have recently brought all parts of the country to 
the brink of a great national disaster. 

If for no other reason than this, piece rates are under suspicion 
as being a wholly undesirable and dangerous method of payment 
to workers. 

In the wage period that came between forced or slave labor and 
modern industrial development, payment by the year, the month, 
the day was usual. It is still customary and more satisfactory be- 
tween farmer and farm workers. The farmer knows for a day’s 
work how many acres should be plowed, how many bushels of corn 
should be gathered, how many cows should be milked, how long 
it should take to drive a load of hogs to the shipping station. The 
farmer can make allowance for muddy or snow-drifted roads, for 
wet or dry fields. It is, moreover, a matter of indifference to him 
whether the worker uses a faster pace and fewer hours or a slower 
pace and more hours. It is the total output that counts. 

When big shops came into existence, the intimate touch between 
employer and employe was lost. The owner of the shop often 
could not operate his own machine. He was only keenly aware, 
for instance, that a machine built to turn out 5,000 railroad spikes 


a day was delivering only 1,250. (He jumped to the conclusion 


that all mechanics were loafers on the job. He could find in- 
stances where some mechanics did loaf.) There are some loafers 
in all positions; those of shop owners included ! 

He therefore sought some new basis of payment. As he was 
paying the mechanic $2.50 a day and getting 1,250 spikes, he con- 
cluded he would offer him a cent for ten spikes. If 2,500 a day 
could be turned out, the wage cost would be cut in half. If the 
Pees turned out 5,000 a day, as the maker of the machine 
assured was possible, the mechanic would make $5.00 a day. 


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This is the whole story of the beginning of piece rates. The 
workers, with correct instincts, violently objected. They were 
right. They called the piece rate method the invention of devils. 
If the employers could have foreseen what piece rates would lead 
to they would have thought the method the invention of the prince 
of devils. 

The worker realized that this method of payment was wholly 
unnatural, that its tendency was naturally either to starve him or | 
to wear him out with excessive toil. 

Imagine a grower of flowers refusing to water his rosebushes or 
to give them sunlight unless they provided roses every day! 
Imagine a horse owner refusing to feed or water or shelter his 
horse except on a mileage basis. Imagine the worker having to 
assume all the risks of poor tools, break-downs of machinery, 
shortages of material and the other hundreds of impediments to 
full output! 

This was not all. A normal, reasonable output of the spike 
machine, if everything worked right, might have been 3,750 an 
hour and $2.50 may have been adequate and standard wages for 
the work, but the piece rate is based on an output of 2,500. The 
ambitious worker, by superhuman energy and endeavor, pushes 
his output for a few days or more up to 5,000. The employer 
considers this a proof that the maker of the machine was right 
in claiming a steady daily output of 5,000, so he cuts the prive 
rate to 20 fer one cent. The worker has the choice of acquiescing 
in a cut in pay, or for a 10 hour day of standardizing, an exertion 
so strenuous it ought not to be expected for more than 6 hours. © 

In the blind struggle against the rate cutting proclivity of the 
shop owner the worker unicnizes and stands pat. Even if he: 
knows that under good conditions 3,750 spikes is a fair day’s ~ 
work for a fair day’s pay, he stands pat at 2,500, accepting $2.5€ 
as normal wage, working at depressingly slow speed for 10 hou: . 
and limiting output. 

The objections to piece rate methods have come to be recog: 
nized by all the most intelligent and thorough investigators of 
working conditions and wage payment plans. 

The chief objections to piece rates are both moral and prac: 
tical: 


(1) 


(2) 


(3) 


Piece rates, the yard, the pound, the square foot, the gallon 
or bushel apply to materials. The work of man is not a 
material thing and is unphilosophically measured with ma- 
terial measures. The measure of a man’s life is not his 
weight or his bulk, but what he produces as to quality in a 
given time. 


Piece rates throw the responsibility of working conditions 
from the manager where they belong to the worker who is 
not responsible. 


They deprive the worker of any certainty as to regular 
earning power, thus making it difficult, if not impossible, 
for him to standardize his manner of living. 


They convert into a gamble, that fundamental fact as to 
his life, daily earning power. 


They encourage individual overstrain as well as excessive 
exertion. 


They stand in the way of variety of work and of promotion. 


They encourage collective standing pat and block reason- 
able output. 


They bring about bitter hostility and disagreement when 
changed conditions demand a change in rates, whether in 
the interest of worker or employer or of common sense 
and justice. 


They encourage the employers to install what, under nor- 
mal conditions, would be impracticable machines. 


They encourage the workers to resist the introduction of 
new inventions and improvements. 


They obscure, especially in the worker’s mind, the rights 
of improved equipment and of improved materials to a 
share in the profits from reduced costs. 

For instance, in a big railroad shop in 1905, the piece rate 
workers refused to permit any change in rates when the 
managers substituted high speed tools costing $0.60 a 
pound, for the old carbon tools costing $0.14 a pound or 
wheel lathes costing $10,000.00 for the old lathes worth 
$1,000.00 each, the new tools and machines, without any 


extra exertion on the part of the worker, turning out five 
times as much work. ; 


(12) In a new shop and for new conditions it is almost impos- 
sible to set up reasonable and fair piece rates. Imagine the 
timid flights of the Wright Brothers put on piece rates 
twelve years ago! Under new conditions piece rates have 
to be abnormally high. If the rates stand, the shop owner 
is ultimately ruined. If the rates are continuously changed, 
great injustice is done the worker. 


What has all this got to do with the recent railroad crises? 

First this—American railroads have been brought into a very 
dangerous condition because very early in American railroad de- 
velopment the two mistakes were made of putting nearly all the 
revenues, as well as a considerable part of the operating expense, 
on a piece rate basis. 

When railroads were started in England, they were influenced 
by stage coach precedents. They put the engineer behind the 
iron horse and called him a driver, they called the railroad car a 
coach or a van. They imitated the class distinction of the four- 
in-hand and then charged by the mile. Coach travel cost by 
the mile. There were no terminal charges, no road upkeep 
charges. It was a piece rate proposition, a price per mile propo- 
sition as to revenues. The great difference between horse coaches 
and railroads was overlooked. Probably 90 per cent of stage 
coach expenses, whether of capital investment or operation, lies 
in the coaches, horses and harness. Even in the modern railroad, 
in the United States, only 20 per cent of the capital and 20 per 
cent of the operating expense are in the moving trains. Classi- 
fied passenger and classified freight rates based on distance are 
founded on one-fifth of the real cost. This is not all. The other 
four-fifths of the cost has been increasing steadily from the 
start. Yard expenses are increasing far more rapidly than road 
expenses. The cost of terminals is growing with the square of 
the population. What is more serious, both will continue to rise. 
Getting so much for nothing, both passengers and shippers con- 
gregate in the big cities and add still further to the congestion, 
to the increased cost of unremunerative railroading. 

Every railroad man, every banker, every investor, every stu- 
dent of transportation knows that rates should be increased be- 


cause the roads can no longer stand the drain of deferred obso- 
lescence of unremunerative investments, especially in terminals. 

Rates ought to be based on four elements and probably a fifth 
added. 


The four basic elements are: 

(1) Cost of collecting the traffic 

(2) Cost of transporting the traffic 
(3) Cost of insurance or classification 
(4) Cost of delivering the traffic. 


Only (2) and (8) now enter into rates. It is as cheap to ar- 
rive at New York at the Pennsylvania Station or at the New York 
Central Station as to drop from the train in Newark or Tarry- 
town. It is as cheap to ship freight to a New York dock as to 
unload it from the car at a country siding. 

In the New York Subway the cost of (1), (3 ) and (4) sinks 
to a vanishing point and nothing is left but the flat cost of run- 
ning trains and a flat revenue per passenger. 

In steam railroad operation costs of both (1) and (4) are very 
great, but they are not directly made up by rates. 

The fifth element that ought to govern charges is a principle 
that even frogs know all about, but which human beings operating 
railroads have not yet learned, namely to put on fat and expand 
when profits are high so as to accumulate a surplus to tide over 
the lean years. This fifth element is really included in (38) classi- 
fication. Railroads now have different rates for different com- 
modities, but $1.80 a bushel wheat and $0.20 cotton are not the 
same as $0.50 wheat and $0.05 cotton. The wheat raised at $1.80 
and the cotton grown at $0.20 and iron at $30.00 a ton can afford 
toe pay rates that vary with the price. 

Piece rates applied to traffic is the tuberculosis that is gradu- 
ally but surely consuming our railroads. 

Piece rates to employes was the next vicious departure from 
sound principles. 

At first train employes were paid by the day. Long hours, 
either on the road or on sidings, worked great hardship. The 
trainmen unionized and succeeded in establishing an alternate 
mile and hour basis. If a train or locomotive man was called for 
duty, even if he never left the station, he received a full day’s 


pay. This was as it ought to be, and this principle ought to have 
been adhered to. But to it was tacked the piece rate of the mile 
If a train or locomotive man made 100 miles it was then consid- 
ered a day’s work, even if made in two hours. The piece rate 
principle became firmly installed alongside of the hourly basis. 

What was the result on railroad operation and costs? 

Why is it that only in America do we see 120,000 pound cars 
and axle loads of 50,000 pounds? 

Because operating costs included trainmen’s wages, but not in- 
terest on capital invested in locomotives, cars, trains and termi- 
nals, railroad managers, driven by the need to make a showing, 
began to plan more revenue tons per train mile, in order to keep 
down or lessen train crew wage costs per revenue ton mile. This 
was very well as long as it led to full cars, full train loads, but 
the plan very soon expanded into heavier locomotives, heavier 
cars, then naturally followed heavier rails, more ties, tie plates, 
stronger bridges, reduced grades and realignments until all that 
was gained in tonnage mile costs was lost in increased obsoles- 
cence, unremunerative betterment and other fixed charges. Mr. 
E. H. Harriman was even led to regret that railroads had not 
been built on a gauge of 6 feet, instead of 4 feet 814% inches, be- 
cause he erroneously thought this would enable him still further 
to increase train load in proportion to train crew. The heavy 
equipment mania induced by trainmen’s piece rate pay per mile 
has made it increasingly difficult to build new or branch lines, 
since each must have rails, road bed and bridges capable of carry- 
ing the 120,000 pound loads now so common. 

In the automobile business this country fully realizes that fast 
running light cars cost less to operate per passenger mile, for 
fuel, for tires, for repairs, for obsolescence and for wear and tear 
on the road and that these economies offset the gain in drivers’ 
wages unless the traffic is continuously very heavy. 

It is a pity that the New York subway tracks are not 6 feet 
gauge, or even 7 feet, since the traffic is very heavy and very 
close. With heavy tonnage roads the present gauge of 4 feet 81/4 
inches is cheap to operate per ton mile, but very expensive where 
the traffic is thin. On the average for the whole United States 
tracks are occupied by moving trains only one per cent of the time. 
We could well afford a higher cost on the stretches of densest 


traffic if thereby operating and maintenance costs were reduced on 
the feeding roads. It is, of course, too late to advocate any change 
from standard gauge in the United States, but the tyranny of tra- 
dition has extended its blight to Alaska, to the Philippines, to 
Cuba, to Porto Rico. 

With greater realization, Tasmania and New Zealand have 
built narrow gauge roads of very great capacity. Pipe lines 
_ have been very effective because they do not waste any power 
transporting the containers, and the road and track are occupied 
continuously to 100 per cent capacity. The nearer railroads 
could have approximated to this, yet preserved the essentials of 
convenience, comfort and speed, the better they would have been. 

Railroad shop piece rates suffer from all the evils of the worst 
application of piece rates. They result in unfair costs 50 per 
cent higher than they should be without benefit to the employes 
who for less effort could be paid higher hourly rates than they 
now earn, yet with much lower unit costs for the railroad company. 

Piece rates to trainmen should be abolished. The work of 
trainmen should be classified. There should be short hours and 
correspondingly high pay for men working under great strain. 
There should be heavy penalties attached for overtime, although 
it does not follow that the man who puts in the overtime should 
receive the penalty. Society wants him to protest against over- 
time, because it may be both dangerous to the public and detri- 
mental to the worker. The worker should not be bribed to en- 
courage it. 

It is evident that pay by the hour with penalties for overtime 
would encourage lighter and faster trains. Lighter and faster 
trains would increase the roads’ capacity as well as car and loco- 
motive mileage. Capital Expenses per car and locomotive mile 
would drop. The savings made would be available to increase 
- wages, to pay higher bills for material and to pay better dividends. 
The third use of piece rates is as interest on bonds. The bond 
‘holder receives a piece rate per thousand dollars without ref- 
erence to the earning power of the road. If bonds and shares 
were married together it would be different. The bond interest 
would constitute the fixed normal return and the increasing divi- 
dends on shares would be a bonus for good conduct and the pass- 
ing of dividends would be the penalty for unfavorable operation. 


Dividends would be the dessert following a regular dinner. But 
under our method, bonds and shares are divorced, some of the 
children receive regular dinner without dessert and others, re- 


ceiving no regular dinner, get dessert or go without. This is bad . 


for both sets of children. It is a catastrophe of the first magni- 
tude for an investment railroad in which the funds of the superan- 
nuated, the dependent, are invested, to pass all dividends. It is 
not only always evidence of bad financing or of bad management, 
but it also encourages the rapacious and predatory few at the 
expense of the many to reap where they did not sow. 


These three forms of piece rates: revenues on mileage basis, 
wages on mile or piece basis, money on flat interest basis, are 
gradually undermining even our strongest railroads. 

Revenues should be based on the five chief elements of cost, not 
on two. Compensation should be based on time with added in- 
crements for varying conditions. Capital investments should be 
conserved by whatever name called. The four great rules of 
correct railroading should always be observed. 

(1) Use sensible and suitable units ; 


(2) Do not overinvest; 


(3) Standardize costs of maintenance and operation and reso- 
lutely attain them; 


(4) Use each unit to the rational limit. 


Show me a railroad observing these four rules and I will show 
you a well managed road. 


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